Consequences for RMD mistakes vary based on circumstances.
You made a mistake.
You calculated your required minimum distribution for your retirement account.
You or your brokerage firm made a mistake.
The figure was too low.
You did not withdraw enough.
What can you do now?
According to a recent Kiplinger article titled “How to Correct a Mistake on Your RMDs from IRAs,” you should contact the IRS immediately to see if they will waive the 50 percent penalty.
The penalty is 50 percent of the amount you should have taken.
Calculate the exact amount you should have withdrawn.
Once you have done this, this withdraw it immediately.
Next, you will need to file Form 5329.
If you miscalculated more than one year, you will need a separate form for each year.
Lines 52 and 53 should be filled out with the number you should have withdrawn and the letters “RC”.
What does “RC’ mean?
“RC” means reasonable cause.
On the dotted line next to 54, write the amount of the penalty for which you are requesting the waiver.
If the issue was due to a brokerage firm error, include a short note explaining what happened and how you took corrective steps immediately upon discovery.
The IRS does not need all the details.
Keep it brief.
Wait to send any penalty money until the IRS accepts or denies your penalty waiver request.
If the broker sent a letter informing you of their mistake, keep it in your files.
This note should not be sent to the IRS.
To make them is human, to forgive is divine.
More information on the process can be found in the Instructions for IRS Form 5329.
Reference: Kiplinger (March 22, 2019) “How to Correct a Mistake on Your RMDs from IRAs”